Reversing the district court’s partial grant of summary judgment in favor of an internet streaming service, the US Court of Appeals for the Ninth Circuit relied on the US Copyright Office’s interpretation of § 111 of the Copyright Act in finding that an internet streaming service does not qualify as a “cable system” under the statute and therefore is not eligible for a compulsory license to stream copyrighted content from broadcast television signals. Fox Television Stations, Inc. v. AereoKiller, LLC, Case No. 15-56420 (9th Cir., Mar. 21, 2017) (O’Scannlain, J).

FilmOn uses antennas to provide over-the-air broadcast programming to subscription customers via internet streaming. After the Supreme Court of the United States’ 2014 decision in American Broad. Cos. v. Aereo (IP Update, Vol. 17, No. 7) held that use of antenna technology to rebroadcast TV to the internet was a “public performance” in violation of US copyright law, FilmOn made an attempt to legally navigate its business within the Copyright Act and applied to the US Copyright Office for a compulsory license to stream its broadcast television content under § 111 of the Act.

Section 111 provides that cable systems are eligible for a compulsory license to retransmit content originally broadcast by someone else. The statute defines a “cable system” as a “facility . . . that receives signals transmitted or programs broadcast by one or more television broadcast stations . . . and makes secondary transmission of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members . . . .”

The US Copyright Office denied FilmOn’s § 111 application on the ground that internet-based retransmission services are not cable systems and thus are not covered under the statute. In the meantime, FilmOn was sued by a significant number of broadcast stations and copyright owners, including the Fox networks, NBC, ABC and Disney, among others (collectively, Fox) for copyright infringement.

Finding that FilmOn did qualify as a “cable system” and may be entitled to a compulsory license for retransmitted broadcast content, the district court granted partial summary judgment to FilmOn. In its decision, however, the district court also authorized the immediate appeal on this “controlling question of law,” noting a difference of opinion among the courts on the issue of whether internet-based retransmission services count as “cable systems” under § 111. In fact, the district court in this dispute was the only court to conclude that internet retransmissions services so qualify.   

On appeal, the Ninth Circuit rejected the arguments put forth by both parties with regard to their respective interpretations of the “plain meaning” of § 111 and whether internet streaming services qualify as “cable systems.”

Fox focused on the word “facility” in the § 111 language and argued that FilmOn is not a cable system because it does not control the full retransmission process, since the internet transmission path is outside of FilmOn’s control, or otherwise beyond its “facility.” The Ninth Circuit disagreed, finding that nothing in the statute compels the conclusion that “cable systems” must have control over the full process or retransmission medium.

Relying on the Supreme Court’s decision in Aereo, FilmOn argued that § 111 “should be interpreted in a technology agnostic manner,” making compulsory licenses available to any facility that retransmits broadcast signals or programming, regardless of the medium. However, the Ninth Circuit was quick to explain that Aereo did not deal with § 111, but instead examined the Copyright Act’s Transmit Clause under § 101 to determine the types of retransmissions that qualify as public performances of copyrighted content.

FilmOn also argued that internet retransmissions should count as one of the “other communications channels” covered by the definition of “cable system” under § 111. On this point, the Court examined particular language of the statute coupled with the legislative history of § 111, which was intended to provide broadcasts to “geographically distant and isolated communities,” and determined that internet services have no similar geographic boundaries. Further, the Court opined that internet-based retransmissions actually lend themselves to piracy and pose a “more serious threat to the value and integrity of copyrighted works.”

Given the ambiguity of the statute with regard to the specific question at issue, the Ninth Circuit turned to the Copyright Office’s long-held interpretation of § 111, unequivocally stating that internet streaming services may not use the same statutory compulsory copyright license granted to cable companies. In reversing the district court, the Ninth Circuit found that the Copyright Office’s consistent position on § 111 strikes a balance between the public’s interest in “improved access to broadcast television and the property rights of copyright holders,” and is based on the statute’s text, structure and legislative history. The court further noted that Congress has “effectively acquiesced” to the Copyright Office’s position, since Congress has repeatedly amended the statute in other respects, but has left this interpretation of § 111 intact.

Practice Note: FilmOn has petitioned for en banc review by the Ninth Circuit. Citing a separation of powers concern and arguing that the court erroneously deferred to the position of the US Copyright Office on the issue of internet streaming services as cable systems, FilmOn argues that the current decision threatens internet-based broadcast television retransmissions as an “important emerging technology.”